Thursday, December 02, 2010

The Federal Budget Puzzle

The New York Times has a cool interactive feature where you can balance the federal budget, addressing both the medium term deficit of 2015 and the more long-term deficit of 2030. It gives a set of options, most of them based on actual proposals that have been made. It will also show you the percentage of your savings that come from tax increases versus spending cuts. David Leonhardt has written an article about the feature, and also more about the NYT's deficit project and its methodology. Meanwhile, their Room for Debate blog has asked 16 people to weigh in on deficit solutions.

I've played with the feature a few times, normally winding up with around 32% in spending cuts and 68% in new taxes. I've seen several other results on the web, including Simon Johnson's (he has a 50-50 split.). It's actually quite easy to balance the budget if you simply cut military spending (ending wars helps) and crack down on the plutocrats. I left the middle class and poor mostly alone, and didn't touch federal employment much, because it's normally cost-effective or economically stimulative (as with federal aid to states). The feature has its limitations, and won't let you, for example, restore taxes on the rich and wealthy to pre-Reagan rates or add more than one slightly steeper marginal tax bracket at the top. The health care reform options are extremely limited, and some of the other "solutions" offered aren't the best. Still, this project is a fantastic idea and the feature is well-designed. It's educational and a great way to start conversations. Among other things, looking over the proposals and the estimated savings show how just slightly higher taxes on the rich, with a few higher marginal brackets, would solve a great deal. (You know, the same people who've made out like bandits over the past ten-thirty years, and the chief beneficiaries of that roughly five trillion the Bush administration added to the national debt.) The feature also reveals how inadequate or ludicrous some of the current fashionable proposals are. For example, cutting foreign aid (a favorite target of John McCain and other conservatives) barely makes a dent. And as was often pointed out during the health care "debate," the GOP's plan for medical malpractice reform amounted to little more than buzz words, wholly inadequate for fixing America's health care problems. Similarly, the conservative mantras about curbing government "spending" tend to be simplistic at best, dishonest at worst (Fiorina's performance on this front remains one of the funniest). However, it's one thing to hear those things or read them, and another thing to see them in this feature, especially if you're the visually-oriented type.

Leonhardt writes, "Arguably, economic growth is the most important yardstick for any plan." As Digby has pointed out, the Democrats should have been arguing that "jobs = deficit reduction" from the get-go. (The Republicans should have been doing so, too, but they don't like to admit it.) When Obama was elected, plenty of liberals called for a New New Deal, but the Obama administration and congressional Democrats largely ignored that argument. The stimulus bill did some good, but it was too small.

I do think (with the Stupid-Evil-Crazy Vortex in mind), some of the opposition to New Deal solutions like jobs programs is purely ideological or irrational, and not truly evil – although there's plenty of evil there, too. (Really every conservative think tank is dedicated to spreading paired lies – that the middle-class-focused New Deal was a failure and that plutocratic Reaganomics have been a great success.) The dogmatic objections have never made much sense to me. The pragmatic argument is, if it works, why not do it? The moral argument is, how is giving someone a job – that actually does some useful work, by the way – possibly a bad thing? I'd refer anti-government absolutists yet again to my Godzilla model of power and politics. If private industry wants to create jobs, great, but they're not doing it, and instead non-financial companies alone are sitting on 1.8 trillion in reserves. (This is, by the way, further repudiation of supply-side economics and further argument for traditional demand-based economic models. Remember when "conservatives" respected that tradition?)

One of the problems with the New York Times feature (good though it is), and all of this deficit chatter, is that it distracts from the much more important issues of job creation and how to stimulate the economy. (Media Matters and some others have made the same point. Media Matters also points out that the NYT badly misuses the term "moderate" regarding the estate tax.) It'd be neat to have another interactive feature that addressed that. Even if it might be more speculative in some respects, there is data about which government measures give the most economic bang for the buck, and which ones cost more money than they bring in. I'd love the option to create jobs programs and invest in education, research, the arts, and infrastructure. It'd be great to reform the tax system - income, capital gains, "robin hood" tax on bank transactions, the estate tax, closing loopholes for billionaire hedge fund managers, adding several marginal brackets at the top, and so on. (I'd love too see a good interactive feature for that, too.) America could really kick ass. Up until the Reagan years, you could find some Eisenhower Republicans who weren't far from where Bernie Sanders is now on economic/fiscal matters.

On the spending side, further reforming health care would be the single biggest cost saver. America stacks up horribly compared to other countries in that regard. To lessen doctor complaints, we could certainly have a more expensive model with higher compensation than other countries, yet still adapt their systems to make things cheaper and more efficient for essential care in the U.S. (Some doctors would gladly trade less pay for the considerable drop in paperwork, billing and other hassles, but still.) Kevin Drum has an eye-popping chart on medical spending, related to the Bowles-Simpson "Catfood Commission" on the deficit. (More here - one and two.) Ezra Klein looks at an older budget calculator that renders this situation starkly.

The most interesting – and progressive – plan I've seen so far comes out of the project Our Fiscal Security. A PDF of the report can be downloaded here. It focuses much more on job creation and other economic growth measures. Brad DeLong, Steve Benen, Digby and Matt Yglesias have posted on it, as has Paul Krugman, who writes:

A coalition of progressive think tanks has released a plan for dealing with the deficit. It’s at least as responsible as any of the other plans being advanced, with a very different emphasis: more reliance on revenue, no attack on Social Security. Some of the revenue comes from indirect taxes — green taxes and fuel taxes — but the rest comes from measures that would raise taxes mainly on upper-income Americans.

I’ll need to work through the proposal, but one thing it clearly does is to explode the myth that there is no alternative to the Bowles-Simpson-type regressive proposal. A lot of inside-the-Beltway types have been trying to sell the notion that a severely weakened social safety net is the only possibility; it isn’t.

And it’s definitely worth noting that even with the revenue measures in the progressive plan, the US would have lower overall taxation than almost any other advanced country.

The progressive Citizens' Commission also has a report out, and a panel of progressive groups met today to discuss "prosperity, not austerity." I imagine some videos will be posted later, and there will be much more to come. However, in the meantime, the Strengthen Social Secuity site (via Digby) provides good information on that issue, and calling your congresscritters to tell them to say no to cutting Social Security wouldn't be a bad idea, either.